For cryptocurrency investors, this rally is starting to look at lot like 2021. Investors in a range of meme tokens are seeing impressive surges in today’s session, with Dogecoin (CRYPTO: DOGE), Shiba Inu (CRYPTO: SHIB) and Floki Inu (CRYPTO: FLOKI) among the most-watched tokens today. As of 2:45 p.m. ET, these three dog-inspired meme coins surged 7.4%, 12.1%, and 68.7%, respectively, over the past 24 hours.
Now, these three meme tokens still have a way to go to achieve their previous all-time highs. But Floki Inu’s incredible surge today puts this lesser-known meme token within striking distance, with another day of similar gains potentially driving this top-60 crypto project to new highs. Accordingly, with so much speculative capital flowing into this sector, investors are increasingly looking at meme tokens as a way to play this trend (given their increased volatility compared to mega-cap tokens).
Let’s dive into what’s driving these three meme cryptos higher, and whether this move is sustainable.
What gives?
Much ado has been made about the broader macro picture improving for the most speculative asset classes. Expectations of interest rate cuts this year have picked up, following dovish commentary from the Federal Reserve. And capital flows into cryptocurrencies like Bitcoin (CRYPTO: BTC) following the Securities and Exchange Commission’s approval of spot Bitcoin ETFs has many investors looking to diversify their portfolios into alternative assets considering the crypto sector once again.
That said, it’s clear that the capital that’s flowing into crypto from institutional money managers and those with big money to throw around isn’t going into meme tokens. Many of these projects remain obscure, despite their multibillion-dollar valuations, with retail investors continuing to drive the vast majority of the trading volume around these digital assets.
Other key factors that appear to be at play driving these speculative meme tokens higher in recent days is the questionable distribution of these tokens (many are supported by significant inside/early investors with outsized positions, and the ability to influence how many tokens trade on the open market via token burns and other mechanisms), as well as a less sophisticated investor base looking to ride momentum trends alongside speculators (who often use leverage to amplify returns in times like these).
Can this rally continue?
Capital inflows from traditional financial markets into the crypto sector are real. Bitcoin is likely to remain the key beneficiary of this move, though I wouldn’t rule out a positive ruling on spot Ethereum (CRYPTO: ETH) ETFs in the coming months, either.
This rally in meme tokens can really be boiled down to one specific driver — speculation. As the crypto sector gains momentum, speculative leverage flows toward the areas of the crypto market that can generate the highest returns. In my mind, it’s that simple right now. After all, there isn’t much in the way of real utility being generated by these tokens (unless you consider the utility being part of an online community can provide).
For now, I’m highly skeptical of this meme token surge, and I think most investors feel the same way. Until there’s some life-changing use case these meme tokens can provide, I’m going to happily observe this mania from the sidelines.
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Chris MacDonald has positions in Ethereum. The Motley Fool has positions in and recommends Bitcoin and Ethereum. The Motley Fool has a disclosure policy.
Woof! Why Dogecoin, Shiba Inu, and Floki Inu Are Barking Higher Today was originally published by The Motley Fool